Recent Changes to PPP Loan and Forgiveness

PPP Loan Changes

Recent Changes to PPP Loan and Forgiveness

AS OF 6/29/2020

As we have stated in prior newsletters, there have been, and will continue to be, changes to the forgiveness of PPP loan calculations, and other PPP related rules. Below are a few of the major and recent changes, and more changes will be forthcoming as the government attempts to interpret the rules of the PPP loans.

If you haven’t considered applying for a PPP loan, act fast as the deadline to apply is June 30. There are still PPP funds available.

This newsletter builds on the many prior updates that we have been sending on the small business and individual stimulus that has become available during this COVID-19 crisis. This is another update. If you missed the prior information, you are able to review it at:


Recent Changes to PPP Loan and Forgiveness

Recently, there was new guidance released by Treasury and SBA regarding PPP loans forgiveness.

  • Familiarize yourself with the new simplified loan forgiveness application called an EZ form that is only two pages plus instructions. Our clients have been asking us about it, especially sole proprietors with no employees.
  • Owner’s compensation (owners salary/payroll) is now capped, for the calculation of payroll costs used for PPP loan forgiveness, for the 24-week period at $20,833 which is 2.5 months’ worth of payroll (not 24 weeks of payroll) or the amount during the same period in 2019, whichever is lower.
  • As of now, expenses paid with forgiven PPP loan funds are not deductible. This is important to remember as you begin calculating estimated tax payments with us for your business, and cash flow planning with us for your business. This can be especially tricky for fiscal year taxpayers and covered periods that overlap tax years. Our affiliates at Padgett are working directly with the IRS on this very issue. We hope that this will change.
  • Rather than eight weeks, recent changes to PPP enabled borrowers to have up to 24 weeks before beginning the loan forgiveness process. Guidance has clarified that you must submit your application no later than 10 months after the covered period ends. It is also acceptable to apply “early” for those who have met the payroll and other expenses qualifiers for loan forgiveness. 
  • The forgiveness process could be lengthy, as the lender has 60 days to review the application before sending it to the SBA. The SBA then has 90 days after that date to remit the forgiveness amount to the lender. Applicants should complete the form based on the full amount of the loan. SBA will make any adjustments for EIDL loans upon review. The applicant can request a second review should part or all of the loan proceeds fail to qualify for forgiveness.
  • Recent guidance provided some clarification on the documentation required to meet the safe harbor associated with the reduction of Full Time Equivalent (Employees) “FTE.” While a “good faith effort” is still needed, the borrower must provide a written offer to rehire an individual, a written record of the offer’s rejection, and a written record of efforts to hire a similarly qualified individual. It is important to note that employers are also required to notify the state unemployment office of any employee’s rejected rehire offer within 30 days. Borrowers are also exempt if they are able to document in good faith an inability to return to the same level of business activity due to compliance with certain organizations, including the CDC and state or local governments.

The rules and regulations for PPP are changing quickly, but we promise to keep you in the know! Please note that many questions remain unanswered, and we (along with our industry affiliates) have reached out to the IRS and Congress for additional guidance. Once we have more information, we will be providing updates via newsletters, Facebook and on our webpage.

At Unbehagen Advisors, we’re ready to assist you with any questions about calculating your maximum loan amount or estimating your loan forgiveness, along with any other questions that you may have as you begin the application process.

Do you have the support you need to manage your small business bookkeeping, payroll and taxes? Schedule a 30-minute appointment to speak with one of our local small business advisors — tax and accounting professionals — since 1992.

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